Similar financial termsTerm to maturity
The term to maturity of a bond, commonly referred to as maturity or term, is the number of years over which the issuer has promised to meet the conditions of the obligation set out in the bond indenture. The maturity of a bond refers to the date that the debt will cease to exist, at which time the issuer will redeem the bond by paying the principal (or face value).
Yield to maturity
The total yield on a bond obtained by equating the bond's current market value to the discounted cash flows promised by the bond. Also referred to as actuarial yield or just yield.
Weighted average remaining maturity
The average remaining term of the mortgages underlying a MBS.
Weighted average maturity
The Weighted average maturity (WAM) of a MBS is the weighted average of the remaining terms to maturity of the mortgages underlying the collateral pool at the date of issue, using as the weighting factor the balance of each of the mortgages as of the issue date.
Time to maturity
The time remaining until a financial contract expires. Also called time until expiration.
For the CMO tranche, the date the last payment would occur at zero CPR.
A variant of pure expectations theory which suggests that the return that an investor will realize by rolling over short-term bonds to some investment horizon will be the same as holding a zero-coupon bond with a maturity that is the same as that investment horizon.
The length of time remaining until a bond's maturity.
Projected maturity date
With CMOs, final payment at the end of the estimated cash flow window.
Maturity at issue. For example, a five year note has an original maturity of 5 years; one year later it has a maturity of 4 years.
A phase of company development in which earnings continue to grow at the rate of the general economy.
Factoring arrangement that provides collection and insurance of accounts receivable.
For a bond, the date on which the principal is required to be repaid. In an interest rate swap, the date that the swap stops accruing interest.
Any large principal payment due at maturity for a bond or loan with or without a a sinking fund requirement.
Current time to maturity on an outstanding debt instrument.
A spread is either (a) the gap between bid and ask prices of a stock or other security, (b) The simultaneous purchase and sale of separate futures or options contracts for the same commodity for delivery in different months (also known as a straddle), (c) the difference between the price at which an underwriter buys an issue from a firm and the price at which the underwriter sells it to the public or (b) the price an issuer pays above a benchmark fixed-income yield to borrow money.
A position in two or more options of the same type.
AN option where the payoff depends on the difference between two market variables.
The simultaneous purchase and sale of two options that differ only in their expiration dates.
Yield spread strategies
Strategies that involve positioning a portfolio to capitalize on expected changes inyield spreads between sectors of the bond market.
Simultaneous purchase and sale of two options that differ only in their exercise price.
Difference between U.S. Treasury bill rate and eurodollar rate; used by some traders as a measure of investor/trader anxiety.
A computer program that organizes numerical data into rows and columns on a terminal screen, for calculating and making adjustments based on new data.
Spreading is a strategy that involves a position in one or more options so that the cost of buying an option is funded entirely or in part by selling another option in the same underlying.
Also called margin income, the difference between income and cost. For a depository institution, the difference between the assets it invests in (loans and securities) and the cost of its funds (deposits and other sources).
Relative yield spread
The ratio of the yield spread to the yield level.
Also called credit spread, the spread between Treasury securities and non-Treasury securities that are identical in all respects except for quality rating. For instance, the difference between yields on Treasuries and those on single A-rated industrial bonds.
Option-adjusted spread (OAS)
(a) The spread over an issuer's spot rate curve, developed as a measure of the yield spread that can be used to convert dollar differences between theoretical value and market price. (b) The cost of the implied call embedded in a MBS, defined as additional basis-yield spread. When added to the base yield spread of an MBS without an operative call produces the option-adjusted spread.
The difference between the bid and asked prices.
A spread strategy in which an investor buys an out-of-the-money put option, financing it by selling an out-of-the money call option on the same underlying.
Applies to derivative products. A strategy in which there is a simultaneous purchase and sale of options of the same class at the same strike prices, but with different expiration date.
The difference between the price of the three-month U.S. Treasury bill futures contract and the price of the three-month Eurodollar time deposit futures contract with the same expiration month.
In the soybean futures market, the simultaneous purchase of soybean futures and the sale of soybean meal and soybean oil futures to establish a processing margin.